Overshadowing Microsoft’s somewhat disappointing report on third-quarter results were questions about its unsolicited bid for Yahoo. The gist of Microsoft’s comments was pretty much the same: We’ve offered plenty, so it’s Yahoo’s move now.
CEO Steve Ballmer’s on a world tour and wasn’t on the call, but here’s what Microsoft CFO Chris Liddell, who may well be driving the workings of the Yahoo deal more than anyone else at Microsoft, had to say about it: “Speed is of the essence in the deal. Unfortunately, the transaction has been anything but speedy,” thanks to what Liddell called “unrealistic expectations of value” on Yahoo’s part given that Microsoft’s initial $31-a-share offer was “extremely generous.” He added: “We’ve yet to see tangible evidence that our bid substantially undervalues the company. In fact, we see the opposite,” going on to note that Yahoo’s earnings weren’t that impressive.
Updates on the deal, he said, will come next week as needed. That sounds like they’ll wait out the Saturday deadline they gave Yahoo before initiating a proxy fight, assuming Yahoo doesn’t respond before then—and people I’ve talked to close to the deal think Yahoo still isn’t in a hurry. But Ballmer won’t want to appear to be letting Yahoo call its bluff, so expect some kind of action or news by early next week, if not sooner.
So, as I said on my last post, the negotiations continue in public. But as I also noted:
Microsoft’s just-reported earnings clearly are disappointing, sending the stock down about $1.50, or 5%, in extended trading after the market close. This can’t help Microsoft’s contention to Yahoo shareholders that its half-cash, half-stock offer shouldn’t be raised, because it’s now worth even less than the approximately $30.50 a share it was at the close.
Also, Microsoft’s online division continued to lose money, $228 million on $843 million in revenues. That’s all the more reason it may feel it needs the scale that would be provided combining those operations with Yahoo—which, don’t forget, remains consistently if not inspiringly profitable.